The Commissioner Of Income Tax, Ajmer v. M/S Asian Construction Company

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 26 / 2012 The Commissioner of Income Tax, Ajmer ----Appellant Versus M/S Asian Construction Company, 716/A, 3[rd] Street Bihari Ganj, Ajmer (Raj.) ----Respondent _____________________________________________________ For Appellant(s) : Mrs. Parinitoo Jain with Ms. Shiva GoyalFor Respondent(s) : Mr. Gunjan Pathak with Ms. Ishita Rawat _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGHJudgment 30/08/2017 1.By way of this appeal, the department has challenged thejudgment and order of the tribunal whereby the tribunal hasallowed the appeal preferred by the assessee. 2.This court while admitting the appeal on 19.03.2012 hasframed following substantial questions of law:- “1. Whether the Tribunal was legally justified inreversing the findings of the CIT(A) and holdingthat the assessee had deducted tax at source anddeposited it in accordance to Chapter XVII andSection 194C and no disallowance was to bemade u/s 40(a)(ia)? 2. Whether the Tribunal was legally justified inreversing the findings of the CIT(A) and holdingthat the assessee was entitled for the payment ofRs.1,01,50,000/- made to the sub contractorswithout deducting TDS according to Section40(a)(ia) r/w 194C?” 3.Counsel for the appellant has taken us to the order passed by the A.O. and contended that the A.O. while considering the mater in detail observed as under:- S.NameGross TDSProfitNet Opening Net Amount Total Closing Noamount balance amount after amount BalanceAmount.payableas on paid 28.02.2009paid 01.04.06upto including 08.02.20opening 07balance1.Poonam Gupta 104759010685314281005477 -4575010425085000095425051227& Sons.2.Pushpendra134057013673402171286680 -3311205185504000009185503681303.Rajesh Sharma129864013246389591246435 -320571217943 01217943284924.Ramesh Bagri896960914926909860902533022500004000006500002109025.Deva Gurjar137055013980411171315453 127850120000012000001154536.Ashok Singhal126731012927380191216364 -367481163522 01163522528427.Moti Lal130505813312391521252594 -38456386543708654373871578.Ashish Gour130379213299391141251379 -270591172941 01172941784389.Gajendra Gahlot 123804512628371411188276 -176784323227500001182322595410Rahul Sharma124764512726374291197490 -3240838759175518341427751-230261.Total12316160125625369485 1182105-1132971 6600882 41518341075271610683340 It was required from the assessee that why theTDS on such sub contractors has not beendeposited in case of payments made upto28.02.2007 as per in accordance with provisionsof law and why the provisions of section 40(a)(ia) of the Income-tax Act, 1961 may not beapplied on such payments made upto28.02.2007 but amount of TDS deposited after31.03.2007. On going through the details and on verificationof such third parties/sub contractors u/s 133(6)of Income-tax Act, 1961 the copies of accountsas furnished clearly discloses the paymentsmade to such sub contractors and assessee wasliable to deduct tax at source upon paymentmade upto 28.02.2007 in accordance with Chapter XVIIB of Incom-tax Act, 1961 as perSection 194C and since the assessee has madethe payments to such sub contractors before28.02.2007 and no TDS deducted nor paid ingovt. account uptill 31.03.2007 hence theprovision of section 40(a)(ia) of income-tax Act,1961 are clearly applicable to the extent ofpayments made upto 28.02.2007 to such subcontractors.” 4.The view taken by the A.O. is confirmed by CIT(A) observing thus:- “3.3 Argument of the appellant have beencarefully considered, but the same is notacceptable. Section 40(a)(ia) of the I.T. Act readsasfollows:- Chapter XVIIB of Incom-tax Act, 1961 as perSection 194C and since the assessee has madethe payments to such sub contractors before28.02.2007 and no TDS deducted nor paid ingovt. account uptill 31.03.2007 hence theprovision of section 40(a)(ia) of income-tax Act,1961 are clearly applicable to the extent ofpayments made upto 28.02.2007 to such subcontractors.” 4.The view taken by the A.O. is confirmed by CIT(A) observing thus:- “3.3 Argument of the appellant have beencarefully considered, but the same is notacceptable. Section 40(a)(ia) of the I.T. Act readsasfollows:- “Any interest, commission or brokerage, (Rent,royalty,) fees for professional services or fess fortechnical services payable to a being resident, oramounts payable to a contractor or sub-contractor, being resident, for carrying out anywork (including supply of labour for carrying ourany work), on which tax is deductible at sourceunder Chapter XVII-B and such tax has not beendeducted or, after deduction. “has not been paid,- (A) in a case where the tax was deductible andwas so deducted during the last month on theprevious year, on or before the due date specifiedin sub section (1) of section 139; or (B) in any other case, or of before the last day ofthe previous year:” “Provided that where in respect of any such sum,tax has been deducted in any subsequent year,or has been deducted- (A) during the last month of the previous yearbut paid after the said due date; or (B) during any other month of the previous yearbut paid after the end of the said previous year, Such sum shall be allowed as a deduction incomputing the income of the previous year inwhich such tax has been paid.” 3.4 From the language of section 40(a)(ia), it isclear that only where the tax was deductibleduring the last month and was actually deductedduring the last month of previous year, allowancehas to be made if the amount is deposited before the due date of filing of return. In the case ofappellant, the sum was deducted during the lastmonth but it was notj deductible in that month.The sum was deductible in earlier months of theyears. The appellant however actually deductedthe amount only during the last month. In such asituation his case falls in category ‘B’ of abovepara i.e. “in any other case on or before the lastdate of the previous year”. Therefore, TDS forsuch earlier months was to be deposited onlybefore end of the previous year for claiming therespective amount ad deduction during the year.Argument of the appellant that since he hasdeducted the tax in the last month i.e. March2007 and deposited the same before due date offiling of return, his case is covered in category ‘A’of above para is not acceptable. 3.5 The argument of the appellant that section40(a)(ia) laid the conditions for allowability of thededuction and the provisions of section 194C arerelevant only for the purpose of ascertaining thedeductibility of tax on payments is fallacious. Ifthis argument is accepted, then a deductor whodutifully deducts tax during the year in variousmonths, but due to some reason is not able todeposit the same before the end of the year willbe at a disadvantage, because in his case therespective payments will not be allowed asdeduction. While on the other hand a deductorwho does not deduct the tax during the year(even though the same was deductible) andmakes the deduction only during the last monthwill be in an advantageous position, becauseaccording to argument of the appellant, in hiscase the respective payments will be allowed asdeduction, even if the payment if made after endof year, but before due date of filing of return.Obviously this can never be the intention of thelegislature. This itself proves the fallacy ofargument of the appellant. 3.6 As mentioned earlier, in this case the tax wasdeductible in various months of the year.Appellant failed to deduct the tax in time. Hededucted tax only during the last month. In sucha situation the disallowance of Rs.1,01,50,000/-made by AO u/s 40(a)(ia) is justified and thesame is confirmed.” 5. Therefore, he contended that the Tribunal has seriously committed an error in reversing the view taken by the AO and CIT(A). 6. However, counsel for the respondent relied upon the decision of the Tribunal which reads as under:- “2.8 We have heard both the parties. The issuebefore us is covered by the order of the Tribunalin the case of Inder Prasad Mathura Lal vsITO(supra). It will be useful to reproduce therelevant para as under:- ‘’3.8 The amendment has been made inSection 40a(ia) which says thatexpenditure is not to be disallowed if thetax at source has been paid on or beforedue date specified in Section 139(1) of theAct. The proviso has also been inserted tosay that expenditure will not be allowablein case TDS has been deposited after thedue date of return provided in Section139(1) of the Act. If the amendment iscurative or where it is intended to remedyunintended consequence or to render thestatuary provisions workable , theamendment is to be construed to relateback to the provisions in respect of which itapplies to the remedy. In the followingcases, amendments have been held asretrospective though such retrospectivewas not mentioned by this legislature whileintroducing such provisions. 1. Allied Motors (P) Ltd. Vs. CIT, 139 CTR364 (SC) The amendment by Finance Act, 1987in respect of the insertion of first proviso toSection 43B was held as curative in natureand the same was given retrospectiveeffect from the date of inception of Section43A. 2. CIT Vs. Alom Extrusions Ltd. , 319 ITR306 (SC) The amendment by Finance Act , 2003for bringing about uniformity aboutpayment in tax, duty, ceee and fee withcontribution to welfare funds was held ascurative in nature and held applicableretrospectively w.e.f. 01-04-1988. 3. CIT Vs. Poddar Cement (P) ltde, 226 ITR625 By Finance Bill, 1987, the meaningand expression of house property inSection 27 was enlarged. The Hon'ble ApexCourt in this case held that the amendmentwas intended to supply an obviousomission or to clear up the doubts as tothe meaning of the word ’owner’. 4. CIT Vs. Vs. Gold Coin Health Food (P)Ltd., 304 ITR 308 (SC) There was an amendment inexplanation 4 to Section 271(1)( c) by theFinance Act , 2002,. This explanation wasnot held as clarificatory by the Hon'bleApex Court in the case of Virtual SoftSystems Ltd. Vs. CIT , 207 CTR 733.However, a larger bench held that anamendment was intended to make clearwhich was otherwise implied and explicit.Hence it was held that penalty in loss caseis also leviable even in prior to 01- 04-2003. 3.9 The amendment in Section 40a((ia)has been held as curative in followingcases:- 1. Kanubhai Ramjibhai Vs. ITO 135 ITD 364 (Ahd,) 2. Bansal Parvahan India (P) Ltd. Vs. ITO137 TTJ 319 (Mum) 3.10 Hence, the addition of Rs. 4,61,638/-is required to be deleted on account ofamendment in Section 40a(ia) by treatingthe same as curative.’’ 2.9 Before amendment by Finance Act, theproviso stated that any sum on which taxhas been deducted during the last month ofprevious year but paid before due date thendisallowance u/s 40(a) (ia) of the Actcannot be made. The proviso refers to thededuction of tax at source in the last monthand it does not state in respect of tax whichare deductible earlier but has not beendeducted in earlier month. If the tax hasbeen deducted in any month other then lastmonth is the month of the previous yearthen the expenditure covered u/s 40(a)(ia)of the Act will not be admissible unless such (Ahd,) 2. Bansal Parvahan India (P) Ltd. Vs. ITO137 TTJ 319 (Mum) 3.10 Hence, the addition of Rs. 4,61,638/-is required to be deleted on account ofamendment in Section 40a(ia) by treatingthe same as curative.’’ 2.9 Before amendment by Finance Act, theproviso stated that any sum on which taxhas been deducted during the last month ofprevious year but paid before due date thendisallowance u/s 40(a) (ia) of the Actcannot be made. The proviso refers to thededuction of tax at source in the last monthand it does not state in respect of tax whichare deductible earlier but has not beendeducted in earlier month. If the tax hasbeen deducted in any month other then lastmonth is the month of the previous yearthen the expenditure covered u/s 40(a)(ia)of the Act will not be admissible unless such tax was paid before the end of the previousyear. In the instant case, it is undisputedthat the assessee has deducted the tax atsource in the last month. Therefore,disallowance was not required to be madeu/s 40(a)(ia) of the Act. Before us, the ld.AR has filed the copy of the TDS returnshowing the payment of TDS in the monthof May 2007. Hence, we hold that the ld.CIT(A) was not justified in confirming theaddition of Rs. 1,01,50,000. 7.Counsel for the appellant has relied upon the decision ofHigh Court of Delhi in the case of Commissioner of Income TaxVs. Naresh Kumar reported in (2014) 326 ITR 0256 (Delhi) wherein it has been held as under:- 28. It is, in this context, that we had in RajinderKumar's case(supra) observed as under: "22. Now, we refer to the amendments whichhave been made by the Finance Act, 2010 andthe effect thereof. We have already quoted thedecision of the Calcutta High Court in VirginCreations (supra). The said decision refers to the earlier decision ofthe Supreme Court in the case of Allied Motors(P) Limited (supra) and Commissioner of IncomeTax versus Alom Extrusions Limited, (2009) 319ITR 306 (SC). In the case of Allied Motors (P)Limited (supra), the Supreme Court wasexamining the first proviso to Section 43B andwhether it was retrospective. Section 43B wasinserted in the Act with effect from 1st April1984 for curbing claims of taxpayers who did notdischarge or pay statutory liabilities but claimeddeductions on the ground that the statutoryliability had accrued. Section 43Bstates that thestatutory liability would be allowed as adeduction or as an expense in the year in whichthe payment was made and would not beallowed, even in cases of mercantile system ofaccountancy, in the year of accrual. It wasnoticed that in some cases hardship would becaused to assessees, who paid the statutory dues within the prescribed period though thepayments so made would not fall within therelevant previous year. Accordingly, a provisowas added by Finance Act, 1987 applicable witheffect from 1st April, 1988. The provisostipulated that when statutory dues coveredby Section 43B were paid on or before the duedate for furnishing of the return under Section139(1), the deduction/expense, equal to theamount paid would be allowed. The SupremeCourt noticed the purpose behind the provisoand the remedial nature of the insertion made.Of course, the Supreme Court also referred toExplanation 2 which was inserted by FinanceAct, 1989 which was made retrospective andwas to take effect from 1st April, 1984.Highlighting the object behind Section 43B, itwas observed that the proviso makes theprovision workable, gives it a reasonableinterpretation. It was elucidated: "12. In the case of Goodyear India Ltd. V. Stateof Haryana this Court said that the rule ofreasonable construction must be applied whileconstruing a statute. Literal construction shouldbe avoided if it defeats the manifest object andpurpose of the Act. "12. In the case of Goodyear India Ltd. V. Stateof Haryana this Court said that the rule ofreasonable construction must be applied whileconstruing a statute. Literal construction shouldbe avoided if it defeats the manifest object andpurpose of the Act. 13. Therefore, in the well-known words of JudgeLearned Hand, one cannot make a fortress outof the dictionary; and should remember thatstatutes have some purpose and object toaccomplish whose sympathetic and imaginativediscovery is the surest guide to their meaning.In the case of R.B. Judha Mal Kuthiala v. CIT,this Court said that one should apply the rule ofreasonable interpretation. Aproviso which isinserted to remedy unintended consequencesand to make the provision workable, a provisowhich supplies an obvious omission in thesection and is required to be read into thesection to give the section a reasonableinterpretation, requires to be treated asretrospective in operation so that a reasonableinterpretation can be given to the section as awhole. 14. This view has been accepted by a number ofHigh Courts. In the case of CIT v. ChandulalVenichand, the Gujarat High Court has held thatthe first proviso to Section 43-B is retrospectiveand sales tax for the last quarter paid before thefiling of the return for the assessment year isdeductible. This decision deals with AssessmentYear 1985-85. The Calcutta High Court in thecase of CIT v. Sri Jagannath Steel Corpn. hastaken a similar view holding that the statutoryliability for sales tax actually discharged afterthe expiry of the accounting year in compliancewith the relevant statute is entitled to deductionunder Section 43-B. The High Court has held theamendment to be clarificatory and, therefore,retrospective. The Gujarat High court in theabove case held the amendment to be curativeand explanatory and hence retrospective. ThePatna High court has also held the amendmentinserting the first proviso to be explanatory inthe case of Jamshedpur Motor AccessoriesStores v. Union of India. The special leavepetition from this decision of the Patna HighCourt was dismissed. The view of the Delhi HighCourt, therefore, that the first proviso to Section43-B will be available only prospectively doesnot appear to be correct. As observed by G.P.Singh in his Principles of StatutoryInterpretation, 4th Edn. At p. 291: "It is well settled that if a statute iscurative or merely declaratory of the previouslaw retrospective operation is generallyintended." In fact the amendment would notserve its object in such a situation unless it isconstrued as retrospective. The view, therefore,taken by the Delhi High Court cannot besustained." 23. Section 43B deals with statutory dues andstipulates that the year in which the payment ismade the same would be allowed as a deductioneven if the assessee is following the mercantilesystem of accountancy. The proviso, however,stipulates that deduction would be allowedwhere the statutory dues covered by Section43Bstand paid on or before the due date of filingof return of income. Section 40(a)(ia)is applicable to cases where an assessee isrequired to deduct tax at source and fails todeduct or does not make payment of the TDSbefore the due date, in such cases,notwithstanding Sections 30 to 38 of the Act,deduction is to be allowed as an expenditure inthe year of payment unless a case is coveredunder the exceptions carved out. The amendedproviso as inserted by Finance Act, 2010 stateswhere an assessee has made payment of theTDS on or before the due date of filing of thereturn under Section 139(1), the sum shall beallowed as an expense in computing the incomeof the previous year. The two provisions are akinandtheprovisosto Sections40(a)(ia) and 43B are to the same effect and for thesame purpose. applicable to cases where an assessee isrequired to deduct tax at source and fails todeduct or does not make payment of the TDSbefore the due date, in such cases,notwithstanding Sections 30 to 38 of the Act,deduction is to be allowed as an expenditure inthe year of payment unless a case is coveredunder the exceptions carved out. The amendedproviso as inserted by Finance Act, 2010 stateswhere an assessee has made payment of theTDS on or before the due date of filing of thereturn under Section 139(1), the sum shall beallowed as an expense in computing the incomeof the previous year. The two provisions are akinandtheprovisosto Sections40(a)(ia) and 43B are to the same effect and for thesame purpose. 24. In Podar Cement Private Limited (supra), theSupreme Court considered whether term„owner‟ would include unregistered owners whohad paid sale consideration and were coveredby Section 53A of the Transfer of Property Act.The contention of the assessees was that theamendments made to the definition of term„owner‟ by Finance Bill, 1987 should be givenretrospective effect. It was held that theamendments were retrospective in nature asthey rationalise and clear the existingambiguities and doubts. Reference was made toCrawford: „Statutory Construction‟ and „theprinciple of Declaratory Statutes‟, FrancisBennion: „Statutory Interpretation‟, Justice G.P. Singh‟s„Principles of Statutory Interpretation‟, it wasobserved that sometimes amendments are madeto supply an obvious omission or to clear updoubts as to the meaning of the previousprovision. The issue was accordingly decidedholding that in such cases the amendments wereretrospective though it was noticed that asper Transfer of Property Act, Registration Act,etc. a legal owner must have a registereddocument. 25. In view of the aforesaid discussion in paras18,19 and 20, it is apparent that the respondent assesse did not violate the unamended section40(a)(ia) of the act. We have noted theambiguity and referred their contention ofRevenue and rejected the interpretation placedby them. The amended provisions are clear andfree from any ambiguity and doubt. They willhelp curtail litigation. The amended provisionclearly support view taken in paragraphs 17- 20that the expression "said due date" used inclause A of proviso to unamended section refersto time specified in Section 139(1) of the Act.The amended section 40(a)(ia) expands andfurther liberalises the statue when it stipulatesthat deductions made in the first eleven monthsof the previous year but paid before the duedate of filing of the return, will constitutesufficient compliance." 29. In view of the aforesaid discussion, we do notfind any merit in the present appeals filed by theRevenue and they are dismissed.” 8. He further relied on another decision of High Court of Delhi inthe case of Commissioner of Income Tax Vs. Harish Chand Ahujareported in (2015) 280 CTR 0403 (Raj.) wherein it has been heldas under:- 11. A Division Bench of Gujarat High Court whileexamining a question in the terms that whetherthe Income Tax Appellate Tribunal was justified indeleting the addition of Rs. 23,13,933/-, relyingupon the amendment made in Section 40[a](ia)of the Income Tax Act, 1961 by the Finance Act,2010 and thereby giving it retrospective effect,after taking into consideration the facts noticedabove arrived at conclusion that the amendmentmade in Section 40[a](ia) of the Income Tax Act,1961 by the Finance Act, 2010 is retrospective inoperation i.e. from the date of insertion ofSection 40[a](ia) of the Act. The conclusionaforesaid was arrived by discussing the entireissue as under:- "16.5 Of course, the Legislature hasgiven the effect from a specified dateand applied the same to A.Y. 2010-11and subsequent years, this provision "16.5 Of course, the Legislature hasgiven the effect from a specified dateand applied the same to A.Y. 2010-11and subsequent years, this provision being curative in nature, its effect needsto be read retrospectively in operation.Its very purpose would not be subserved,if the effect is limited to A.Y. 2010-11and subsequent years only. Strictconstruction if leads to a result notintended to be fulfilled by the object oflegislation and another construction ispossible apart from literal construction,then that construction needs to bepreferred as held in a decision in case ofCIT v. Alom Extrusion Limited [Supra]. 16.6 We also cannot be oblivious ofsubmissions not denied by the other sidethat various representations were madeto the Finance Minister to bring aboutsuitable amendment as the assesseeotherwise was losing genuine deductionof expenditure on this count as alsoreflected in the speech of FinanceMinister so also in the memorandumexplaining the provision of the FinanceBill. 16.7 Giving plain or natural meaning tothe amendment as contended by theDepartment, if is likely to create asituation enhancing the hardship andadvance discrimination, purposive andreasonable interpretation is required tobe given by the Court. When plaininterpretation frustrates the verylegislative intent, the Court is expectedto bear in mind the legislative intentfrom the language used in the statuewith the help of permissible tools ofinterpretationofstatute. 17. The core issue as to whether theamendment made by the Finance Act2010 to Section 40[a](ia) of the Act isretrospective from the date of insertionof the provision i.e., 1st April 2005therefore needs to be answered inaffirmation. It can be seen that theamendment made by the Finance Act2010 allows additional time upto the duedate of filing of the return in respect ofeven those instances where TDS hasbeen deducted during the first elevenmonths of the previous year. Theadditional time till the due date of filingof the return, in case of TDS made during the last month of the previousyear was already available by theamendment made by Finance Act 2008.Thus, it is apparent that the relaxationmade by the amendment made underthe Finance Act, 2010 brings the law inparity with the aforementioned situationand accordingly, for the TDS deducted allthroughout the year, time is extendedfrom payment till the filing of return. It isthus apparent that when the amendmentintroduced by the Finance Act, 2008 ofrelaxing the time for deposit of TDS wasmade retrospective from the year 2005[1st April 2005], the amendment byFinance Act 2010 with regard to otherlimb of time limit for payment of TDS hasto be held retrospective not from 1stApril 2010 only. If we recall at this stagethe speech of Finance Minister whileintroducing this provision by way ofFinance Act, 2010, this amendmentessentially has been brought for relaxingthe current provision on disallowance ofexpenditure. The tax, if is deducted atany time during the financial year andpaid before the date of filing of thereturn, the Legislature intended to allowdeduction on such expenditure with anintention to permit additional time formost deductors upto September of thenextfinancialyear. 17.1 We draw further support from thefact that the rigor of payment of interestis also enhanced by increasing theinterest charged on tax deducted, if anydeposit by the specified date i.e., up tothe filing of the return is not made, from12% to 18% per annum in the provisionof Section 201(1A). Prior to the saidamendment of Finance Act, 2010 underSection 201(1A), assessee was liable topay simple interest at one per cent forevery month or part of month, in case offailure to deduct tax on payment ofdeducted tax, increase is madecorrespondingly from one per cent to oneand half per cent for every month or partof month for discouraging delay indeposit. 17.2 As rightly contended by therespondents arithmetical discrepancy can be well judged from the fact that therates of TDS may vary between 1% to10%, whereas, legitimate businessexpenditure denied is 100% resultinginto taxation of gross receipts coupledwith levy of interest and penalty, whichwould mean that the possibility cannotbe ruled out of business of the tax payergetting closed down permanently, ifthere is absence of any scope of claimingany expenses in the next year. 17.3 It can be thus seen that theamendment to Section 40[a](ia) by theFinance Act, 2010 is only an amendmentin continuation of the earlier amendmentmade in the Finance Bill, 2008 withretrospective effect from 1st April 2005.The Legislature, while extending the timefor payment of TDS deducted in themonth of March till due date of filing ofthe return under section 139(1) of theAct, considered the apparent differencewhere an unintended benefit was givento the assessee who deducted the entireyear's TDS in the month of March of theprevious year which were eligible to payTDS so deducted to the Government bydue date of filing of the return underSection 139(1) of the Act. However, theassesses who may have deducted the taxin earlier months beginning from April tothe end of February of the previous year,did not get such benefit of extended timeand thus the same worked unreasonablyfor such assesses, and therefore, it canbe safely held upholding the contentionof the respondents that to cure suchdefect, amendment in the year 2010 hasbeen brought and the benefit ofextended time to avoid hardship wasgiven to the assessee and therefore,amendment of 2010 is in continuation tothe amendment of 2008, and therefore,curative in nature and the same has tobe held retrospective i.e., with effectfrom 1st April 2005." 9.Counsel for the appellant has also relied on the decision ofHigh Court of Karnataka in the case of Commissioner of Income Tax Vs. Santosh Kumar Shetty reported in (2014) 89 CCH 0199 KarHC wherein it has been held as under:- “5. The argument of the Revenue is, whenthe Finance Act, 2010, expressly states that thesaid provision would come into effect from01.04.2010, it is not permissible for theTribunals or the Courts to give it a retrospectiveeffect prior to the date and therefore, it issubmitted that the order passed by the Tribunalholding it as retrospective notwithstanding thefact that the parliament made its intention clearby declaring that it comes into effect from01.04.2010. Therefore, the impugned orders areliable to be set aside. 6. This question came up for consideration beforethe Gujarat High Court in the case ofCommissioner of Income Tax, Ahmedabad IV Vs.Om Prakash R Chaudhary in Tax AppealNos.412/2013 and connected matter, which cameto be decided on 22.11.2013, after referring tothe judgments of Alide Motors (P.) Ltd. Vs. CITreported in AIR 1997 SC 1361 and CIT Vs. AlomExtrusions Limited reported in (2009) 319 ITR306, has held as under: 6. This question came up for consideration beforethe Gujarat High Court in the case ofCommissioner of Income Tax, Ahmedabad IV Vs.Om Prakash R Chaudhary in Tax AppealNos.412/2013 and connected matter, which cameto be decided on 22.11.2013, after referring tothe judgments of Alide Motors (P.) Ltd. Vs. CITreported in AIR 1997 SC 1361 and CIT Vs. AlomExtrusions Limited reported in (2009) 319 ITR306, has held as under: "15.4: Thus, considering relevant legislativechanges made by the Parliament from time totime and some of the decisions relevant toconsider the question of retrospectivity raised inthese present appeals, the focal question,therefore, would be whether the amendmentbrought about by way of Finance Act 2010in Section 40 [a](ia) with effect from 1st April2010 could be said to be clarificatory in naturefor attending to unintended consequences, andtherefore, is having retrospective effect from 1stApril 2005. 16: A closer examination needs to be done as towhether the amended provision aims to expandthe prevailing position and whether the samebeing in the nature of curative, retrospectivity ofthe same is permissible as is being contended forand on behalf of the assessee. At this stage,therefore, the true effect of such amendmentneeds to be discerned. 16.1: It is demonstrated before us that the TDSprovision caused unintended inexplicablesituation whereby the assessee who deducted thetax at source from the payments made by it forand on behalf of the Government and then ifmisses out the time limit of depositing the same with the Treasury within the time prescribed, theamount spent for its business purposes onaccount of the late deposit of such tax wouldresult into disallowance of entire expenditureunder Section 40[a](ia). The said proviso therebycaused immense hardship. The amendmentunder consideration made by the FinanceAct 2010 relaxes the rigors of such provision bypermitting payment of Tax till the filing of returnas provided under sub-section (1) of Section139 of the Act. 16.2: One can notice that the object of briningabout provision of Section 40(a)(ia) in the year2005 - 06 was to augment compliance of TDSprovision. TDS either not deducted or deductedbut not paid in respect of payment of interest,commission or brokerage etc., before the expiryof time prescribed under sub-section (1)of Section 200 and in accordance with the otherprovisions of Chapter XVII, such amount shall notbe deducted in computing the 'income'chargeable under the head 'Profit & Gains' ofbusiness or profession. Such provision starts withnon obstante clause which states thatnotwithstanding anything contained in Section30to 38 of the Income-tax Act, if the taxdeducted at source is not paid within prescribedtime [under Section 200 (1)], no amount couldbe deducted while computing the income, underChapter IV of the 'computation of businessincome'. 16.3: Thereafter, by way of amendmentof Finance Act, 2008, further amendment wasmade whereby TDS deductible and deducted inthe last month of previous year if was not paidtill the due date of filing of return under sub-section (1) of Section 139 and in any other case,on or before the last day of the previousyear, Section40(a)(ia) providedfor thedisallowance of expenses like interest,commission, brokerage, etc. 16.4: Since, thishad created anomaly, whereby tax deducted inthe last month was permitted payment till filingof return as per sub-section (1) of Section139 whereas for the TDS deducted during therest of the months, period was provided only till31st March of the previous year, Finance Act,2010 was brought. To bring parity, to remedyunintended consequences and to make theprovision workable, it proposed to amend thesaid provision and provided inter alia that nodisallowance would be made if after deduction oftax during the previous year, the same has been paid on or before the due date of filing of returnof income as specified in sub-section (1)of Section 139. This has been givenretrospective effect from 1st April 2010. 16.5: Of course, the Legislature has given theeffect from a specified date and applied thesame to A.Y.2010-11 and subsequent years, thisprovision being curative in nature, its effectneeds to be read retrospectively in operation. Itsvery purpose would not be sub-served, if theeffect is limited to A.Y.2010-11 and subsequentyears only. Strict construction if leads to a resultnot intended to be fulfilled by the object oflegislation and another construction is possibleapart from literal construction, then thatconstruction needs to be preferred as held in adecision in case of CIT V. Alom Extrusion Limited[Supra]. 16.6: We also cannot be oblivious ofsubmissions not denied by the other side thatvarious representations were made to theFinance Minister to bring about suitableamendment as the assessee otherwisewas losing genuine deduction of expenditure onthis count as also reflected in the speech ofFinance Minister so also in the memorandumexplaining the provision of the Finance Bill. 16.7: Giving plain or natural meaning to theamendment as contended by the Department, ifis likely to create a situation enhancing thehardship and advance discrimination, purposiveand reasonable interpretation is required to begiven by the Court. When plain interpretationfrustrates the very legislative intent, the Court isexpected to bear in mind the legislative intentfrom the language used in the statue with thehelp of permissible tools of interpretation ofstatute. 17: The core issue as to whether theamendment made by the Finance Act 2010to Section 40[a](ia) of the Act is retrospectivefrom the date of insertion of the provision i.e.,1st April 2005 therefore needs to be answered inaffirmation. It can be seen that the amendmentmade by the Finance Act 2010 allows additionaltime upto the due date of filing of the return inrespect of even those instances where TDS hasbeen deducted during the first eleven months ofthe previous year. The additional time till thedue date of filing of the return, in case of TDSmade during the last month of the previous yearwas already available by the amendment made by Finance Act 2008. Thus, it is apparent thatthe relaxation made by the amendment madeunder the Finance Act, 2010 brings the law inparity with the aforementioned situation andaccordingly, for the TDS deducted all throughoutthe year, time is extended from payment till thefiling of return. It is thus apparent that when theamendment introduced by the Finance Act, 2008of relaxing the time for deposit of TDS was maderetrospective from the year 2005 [1st April2005], the amendment by Finance Act 2010 withregard to other limb of time limit for payment ofTDS has to be held retrospective not from 1stApril 2010 only. If we recall at this stage thespeech of Finance Minister while introducing thisprovision by way of Finance Act, 2010, thisamendment essentially has been brought forrelaxing the current provision on disallowance ofexpenditure. The tax, if is deducted at any timeduring the financial year and paid before thedate of filing of the return, the Legislatureintended to allow deduction on such expenditurewith an intention to permit additional time formost deductors upto September of the nextfinancial year. 17.1: We draw further support from the fact thatthe rigor of payment of interest is also enhancedby increasing the interest charged on taxdeducted, if any deposit by the specified datei.e., up to the filing of the return is not made,from 12% to 18% per annum in the provisionof Section 201 (1A). Prior to the saidamendment of Finance Act, 2010 under Section201 (1A), assessee was liable to pay simpleinterest at one per cent for every month or partof month, in case of failure to deduct tax onpayment of deducted tax, increase is madecorrespondingly from one per cent to one andhalf per cent for every month or part of monthfor discouraging delay in deposit. As rightly contended by the respondentsarithmetical discrepancy can be well judged fromthe fact that the rates of TDS may vary between1% to 10%, whereas, legitimate businessexpenditure denied is 100% - resulting intotaxation of gross receipts coupled with levy ofinterest and penalty, which would mean that thepossibility cannot be ruled out of business of thetax payer getting closed down permanently, ifthere is absence of any scope of claiming anyexpenses in the next year.” 10. We have heard both the sides. 11. Taking into consideration the observations made by theTribunal as reproduced hereinabove and in view of the decision ofthis court as referred (supra), the view taken by the Tribunal isrequired to be confirmed. 12. Therefore, the issues is required to be answered in favour ofthe assessee against the department. 13. The appeal stands dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. JyotiItem No.29